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New five-year plan for DSV Mexico's Solutions business

The recipe for growth is the unique Mexican discipline: Vendor-Managed Inventory (VMI), in which DSV collects and delivers products from multiple suppliers to a single end-user.

DSV Mexico's Solutions team

Reyvid Villegas (third from left) together with his closest team, including Michael Marlow, Vice President, Operations (fourth from left).

Before the acquisition of UTi in 2016, DSV's Solutions business in Mexico was non-existent. Today, 11 of the country’s 15 warehouses are multi-user facilities and all of 85% of the turnover is generated by VMI solutions for customers. This unusually high percentage of total Solutions business is linked to the fact that Mexico has a higher share of major manufacturing companies, not least in the high-tech and automotive industries, and these companies use hundreds of suppliers, who cannot justify running a warehouse in close proximity to the end-user. At the same time, just-in-time delivery to factories requires a complex IT set-up and especially well-educated and highly motivated employees – and it would not be profitable to establish these as individual suppliers.

We assist them in being good suppliers for their customers, i.e. the end-user,

says Reyvid Villegas, Vice President, Operations, DSV Solutions, Mexico, which currently has almost 800 employees dispersed throughout Mexico.

Proximity is crucial

The customers are usually suppliers from Asia, Europe or the United States, which means they do not own their own warehouse, because their volume of goods is not big enough.

"We enter into agreements with the individual suppliers and the end-user and then establish a storage facility in close proximity to the customer, unless we already have a facility we can use," he explains.

Reyvid Villegas has been working for DSV for 16 years – or rather for what eventually became DSV: He initially worked for Span, before it was acquired by UTi in 2007. Then for UTi, whose acquisition of Span provided the company with comprehensive warehousing activities in Mexico. These activities are now operated by DSV.

Building block for growth

Once DSV has established the physical infrastructure for just-in-time delivery to customers, typically in the high-tech and automotive industries, the rest of the storage facility is filled up with additional smaller customers who can make use of the existing infrastructure. This has been the recipe for growth so far, and it is also one of the building blocks for growth going forward:

"The defining feature of our Solutions business in Mexico is that we have many small customers, making us far less vulnerable to fluctuating turnover. And small customers can often be implemented without having to make additional investments," he says.

A few months after the take-over of UTi, Reyvid Villegas was promoted to vice president of Solutions in Mexico. But not before he attended a meeting with the executive corporate management where he introduced the new owners to an ambitious plan for growth and a timetable for achieving the targets.

Organic growth – and new business

Reyvid Villegas wants to increase turnover by 3% per annum together with the existing customers and he intends to do this by providing best-in-class services.
"If customers are satisfied, they place more of their business with us, at the same time that they recommend us to other members of their network. We have a reputation for being one of the strongest providers of VMI programmes in Mexico, as they comprise more than 230 suppliers of the biggest high-tech companies and the automotive industry," Reyvid Villegas says. At the same time, he wants to bring in new customers each year, equating to 12% of the turnover.

"In part through recommendations from existing customers and in part through outright sales work," Reyvid says, emphasising the sales cooperation with our Air & Sea business in Mexico.

"We share our best customers with each other and whenever a stocking potential emerges, they call us, just like we call them if one of our customers needs transport solutions. We have all the information we need from each other, and we know who to contact and what each of us can provide," he says.

view of Mexico City

New warehouse in Mexico City

The following is an example of how one of the organisation’s newest customers was just produced by this cooperation between Air & Sea and Solutions Mexico. This October, Solutions will open the doors of its first warehouse in the capital. This brand-new warehouse in Mexico City will initially house Danish company Chr. Hansen Holding A/S (manufacturer of ingredients for the food industry). The agreement came about via a joint tender with our Air & Sea colleagues, which at the same time landed air transports from, among other places, Denmark to Mexico. The tender was submitted by DSV Mexico and the negotiations comprised a total solution of both transport and storage.

"Chr. Hansen Holding will be the anchor customer at the storage facility, after which we will use the rest of the capacity for several smaller customers. Mexico City’s population of 22 million makes it one of the biggest cities in the world, and there will be a lot of opportunities to enlarge our customer base in the area of retail and consumer goods," Reyvid says, pointing out that the 5,500 m2 warehouse has the potential to be enlarged threefold.

"With the automotive and high-tech industries as our primary industries, this new facility gives us every opportunity to grow in markets where our presence is limited today, and I’m convinced that we’ll grow very rapidly in this field. Mexico City has a great number of customers within the retail and consumer goods sector, so I am quite excited," he says.

Cost-cutting plan

Concurrent with these comprehensive plans for growth – which are intended to double the existing turnover and profit margin over a five-year period – ambitious cost-cutting targets have also been set. Costs must be reduced by 3.5% each year, which will be achieved by focusing on ongoing improvements, smooth implementation of new customers, and fast and efficient pricing for the submission of tenders.   

A specific employee will be dedicated to each individual cost-cutting area, and the group will be led by a logistics manager who is responsible for achieving the targets using DSV's continuous improvement principles.

"We’ve set ambitious growth targets for Mexico’s Solutions division, and experience tells us that costs have a tendency to mushroom if you don’t make a deliberate effort to rein them in from the outset. We go one step further and cut an additional 3.5% from costs year after year. This is how we will achieve our targets," according to Reyvid Villegas.

 

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